True or False? If the following statement is false, briefly explain why it is false: Company...

True or False? If the following statement is false, briefly explain why it is false:

Company A acquires 90% of Company B. Goodwill represents the difference between the book value of the subsidiary's net assets and the amount paid by the parent to buy ownership.

Expert Solution

Answer:- The given statement "Company A acquires 90% of company B. Goodwill represent the difference between the book value of subsidiary's net assets and amount paid by parent to buy ownership" is false.

The given statement is false because of Goodwill is =[The aggregate value of the consideration transferred((generally measure at fair value) +the amount of any non-controlling interest + the acquisition-date fair value of the acquirer's previously-held equity interest in the acquiree] - The identifiable net assets acquired.

So therefore Goodwill=[Consideration transferred +Amount of non-controlling interests+Fair value of previous equity interests] - dentifiable net assets acquired.

So therefore only a difference between the book value of subsidiary's net assets and amount paid by parent to buy ownership will not represent the amount of goodwill. So that's why given statement in question is false.

ekkarill92 answered 3 months ago

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